Legal and regulatory updates

The Pension Schemes Bill [HL] 2019-20 (Bill) was re-introduced before Parliament on 7 January 2020. Among its proposed amendments to the Pensions Act 2004 (Act) are new criminal  offences for failing to comply with a contribution notice, avoiding employer debt, conduct risking accrued scheme benefits, an expansion of the moral hazard powers and an extension of the ‘notifiable events’ framework. The Government’s stated intention is to “ensure that those who put pension schemes in jeopardy feel the full force of the law“.  Unfortunately, scope of the amendments is such that if enacted without amendment, they are very likely to deter responsible directors from attempting to restructure financially distressed employers facing significant exposure to defined benefit pension scheme liabilities.
Continue Reading

Just in time for Chinese New Year, a Hong Kong court has taken a major step forward in the developing law on cross-border insolvency by recognising a mainland Chinese liquidation for the first time. In Joint and Several Liquidators of CEFC Shanghai International Group Ltd [2020] HKCFI 167, Mr Justice Harris granted recognition and assistance to mainland administrators in Hong Kong so they could perform their functions and protect assets held in Hong Kong from enforcement.

He also declined to follow English precedent dating back more than a century by granting a stay on creditor proceedings in Hong Kong, reasoning that it was in line with modern thinking and practice in cross-border insolvency that a debtor’s assets should be distributed as part of a single proceeding, as per the pari passu principle.
Continue Reading

Germany has notoriously broad voidability laws. As a rule of thumb, any payment by a third party has high voidability risks if the third party has no obligation to make the payment under the contract. Such payments qualify as incongruent (3 months hardening period, very few further requirements) and often qualify as gratuitous (4 years hardening period, without any further requirements). A recent decision of the German High Court has stirred hope that the Court may give some leeway to cash pool payments by group companies. However, on a closer look at the decision, it becomes clear that the boundaries for an exemption from voidability were set very narrowly.

Comment on the German High Court decision dated 12. September 2019 (file no.: IX ZR 16/18) by Christine Borries, LL.M. (Sydney) and Dr. Markus Huber, lawyers of the German Hogan Lovells insolvency and restructuring practice.
Continue Reading

With thanks to Anton Korobeynikov of Sayenko Kharenko for his contribution to this article

On 25 September 2019, the Ukrainian Parliament brought into force law No. 112-IX (the “Law“). The purpose of the Law is to correct deficiencies in existing legislation and further promote out-of-court financial restructurings in the jurisdiction. The adoption of the Law comes in light of the high volume of non-performing loans which still exist in Ukraine.
Continue Reading

The Hong Kong Court of Appeal has suggested that a previous Court decision may have overstepped the mark by suggesting that an arbitration clause in a client agreement should generally take precedence over a creditor’s right to present a winding-up petition.

In But Ka Chon v Interactive Brokers LLC [2019] HKCA 873 (an otherwise fairly routine financial product misrepresentation case), Vice President of the Court of Appeal Madam Justice Kwan made obiter comments implying that the test previously set out by Harris J last year in Lasmos Limited v Southwest Pacific Bauxite (HK) Limited [2018] HKCFI 426, which followed recent English authority, appeared to be at odds with classical Hong Kong and Commonwealth authority whereby a winding-up petition may only be dismissed by establishing a bona fide defence on substantial grounds to the claim for the underlying debt.
Continue Reading

American pet owners are probably all familiar with Chewy, an e-commerce pet food and products supplier that will quickly ship those heavy bags of dog or cat food right to your doorstep at competitive prices. No longer did one of the authors of this article have to walk 30 minutes round trip in the dog days of humid DC summers to pick up and carry a 30 pound bag of Taste of the Wild grain-free high prairie recipe to feed an English bulldog and a French bulldog. Leveraged finance attorneys, investors, lenders and borrowers should also be familiar with Chewy, though for reasons that highlight the complexities and risks associated with today’s leverage finance market.
Continue Reading

On 19 September 2019, Norris J handed down judgment in the challenge brought by six landlords against the Debenhams Retail Limited (Debenhams) company voluntary arrangement (CVA) which was approved by 94.71% of Debenham’s unsecured creditors on 9 May 2019. The challenge been watched with significant interest, particularly by the landlord community, which has for some time expressed increasing concerns regarding the use of CVAs as a mechanism to commute leasehold liabilities while other unsecured creditors’ rights remain unaffected. While CVAs have been the subject of legal challenges previously, the Debenhams challenge is the first time certain key elements of CVAs in play in the market have been tested before the court.  Norris J’s decision provide welcome clarification on a number of key issues concerning the treatment of leases in retail CVAs.

Continue Reading

The Preventive Restructuring Frameworks Directive (EU) 2019/1023 is finally in force. Following its implementation into EU member states’ national law, the directive will hopefully prove an effective tool for Europe’s restructuring practitioners, just as the continent’s economic outlook darkens.
Continue Reading